Local Leaders 2021 Shows Where the Top 50 New-Home Markets Stand Based on 2020 Closings

At this time last year, new-home construction faced a crisis. The COVID-19 pandemic had disrupted regular operations, new construction and sales had stalled, and the economy was in a deep, sudden recession. BUILDER itself cautioned readers that the housing market had been “thrown into turmoil,” and that 2019’s closing patterns—then the strongest year for the market since the Great Recession—could not fully indicate how home sales would fare in 2020.

Since then, the housing market has undergone a complete rebound—one of the only industries to do so over the course of the pandemic. Virtual sales, home tours by appointment, and safety measures on jobsites have enabled new-home construction to continue with little interruption. Low mortgage rates and work-from-home arrangements lured former commuters out of cities to find larger homes at more affordable prices, whether in suburban areas or smaller markets. Builders bracing to take a hit instead found themselves inundated with demand, and some even limited sales or intentionally raised prices to stem the flow and avoid gapping out.

“The strength in the housing market throughout 2020 surprised even the best of forecasters,” says Ali Wolf, chief economist at Zonda. “In early pandemic days, the housing market was almost uniformly crushed. After just a few short weeks, though, we started to see green shoots.”

This year’s Local Leaders list ranks the nation’s 50 largest new-home markets by closings in 2020. The full list provides the new-home closing numbers and market share of the top 10 builders in each of those 50 markets.

Strength in Numbers

The top five markets—Dallas-Fort Worth-Arlington, Texas; Houston-The Woodlands-Sugar Land, Texas; Atlanta-Sandy Springs-Alpharetta, Georgia; Phoenix-Mesa-Chandler, Arizona; and Austin-Round Rock-Georgetown, Texas—have all maintained their positions for the past several years. All five saw an explosive amount of new-home growth in 2020, relative both to 2019 and to the rise in closings from 2018 to 2019.

In Dallas, the No. 1 market, builders closed 41,035 new homes in 2020, up from 34,197 in 2019, for a 19.9% increase. By comparison, builders closed 32,161 homes in Dallas in 2018, and closings rose only 6.3% from 2018 to 2019. Houston, coming in second, saw 34,353 new-home closings in 2020, up 12.3% from 30,566 in 2019.

“Houston faces the same building materials shortages and cost increases that most major housing markets around the country are contending,” says Lawrence Dean, Houston regional director at Zonda. “However, that has not stopped Houston from achieving a 20% increase in annual new-home starts. Houston’s current elevated annual starts rate of 38,300 still significantly trails this region’s peak annual starts volume of 50,000, [but this] is likely a positive dynamic as this will mitigate risk of oversupply.”

Market Movements

While the top five markets remain the same as last year, rankings six through 10 have all reshuffled positions. Orlando-­Kissimmee-Sanford, Florida dropped from No. 6 to No. 7 this year with 13,521 new-home closings, down from 14,183 in 2019. “Orlando recorded the greatest percentage of pandemic-related job losses in Florida,” says Tony Polito, regional director for Central Florida and Tampa at Zonda. “As of March, Orlando has recovered just 34% of the over 260,000 lost jobs. Moreover, first-time buyers are moving into and commuting from nearby core-based statistical areas like Lakeland and Deltona-Daytona Beach as homes are more affordable in the outlying areas.”

Across the state, the Tampa-St. Petersburg-Clearwater market rose to No. 8 this year from No. 10, up from 12,306 closings in 2019 to 13,067 in 2020. “Tampa has seen steady demand from pandemic-driven migration,” Polito says. “Unlike Orlando, Tampa has recovered 76% of the jobs that were lost last April. While prices have risen sharply over the last year and housing inventory is at historic low levels, demand remains robust.”

San Antonio-New Braunfels, Texas, moved into Orlando’s former position at No. 6, with 15,043 closings in 2020. Charlotte-Concord-Gastonia, N.C.-S.C., moved to No. 9 from No. 8, while the Washington, D.C., market slid from No. 7 to No. 10.

“[The D.C. Metro area] is one of the most land-supply constrained areas of the country,” says Ben Sage, senior regional director for the Mid-Atlantic at Zonda. “There is currently plenty of demand, but the vacant developed lot supply and the new-home community counts are declining steadily. These declines have accelerated in the past year. New home activity would be on the rise if we had more to sell. D.C. is exhibiting some signs of outward migration pressure, similar to New York, Seattle, Los Angeles, and Boston. Baltimore may actually be benefiting from some of this D.C. out-migration, but the home building industry can’t take advantage of this due to a lack of supply.”

Other strong movers include Boise City, Idaho, which rocketed from No. 27 to No. 22 with 6,447 closings in 2020, and Jacksonville, Florida, which rose from No. 19 to No. 16 with 9,548 closings. “Boise continues to see a significant amount of people moving in from out of state, bringing with them a large amount of cash/equity. With more companies allowing employees to work from home anywhere, these people are choosing the higher quality of life that Boise has to offer,” says Eric Allen, Zonda’s regional director for Utah and Idaho.

Through all of the upheaval from the past year, good and bad, the total market share for each market’s top 10 builders has remained relatively stable in the most productive markets. The widest movement in the top 10 markets was in Orlando, where the top 10 builders’ market share rose from 70.4% in 2019 to 74.9% in 2020.

“[In 2020, we classified] markets like Dallas, Phoenix, Austin, and Tampa as low risk, while markets like Houston, Orlando, Las Vegas, and Miami were categorized as high risk,” Wolf says. “What the list called wrong was the high-risk markets. Places like Orlando and Las Vegas, for example, are known as service-sector and tourism hubs, and, in a pandemic, those sectors do not perform well. These markets had, and still have, elevated unemployment rates. [But] winners in those markets realized interest rates were at rock-bottom levels and now actually did seem like a good time to buy a home.”

Across the list, a number of markets dropped down in rank despite posting a higher volume of home closings from last year, simply because other markets’ closing numbers rose more quickly. This includes the Charlotte, Cape Coral-Fort Meyers, Las Vegas, and Sacramento markets. Out of the 46 markets that appear on both the 2019 and 2020 lists, only 10 posted fewer home closings in 2020 than in 2019, a number of them major gateway markets including New York City, Los Angeles, Washington, D.C., and Chicago.

Moving Forward

2020’s strong new-home trends began to move in the opposite direction in early 2021, spurring new sources of uncertainty for the year to come.

Low lot supply, building material shortages, and skyrocketing lumber costs have begun to push home prices out of the reach of many buyers, and COVID-19 remains a concern—albeit a diminishing one as more of the population is vaccinated.

“Lumber is the obvious headache, but copper, resin, insulation, concrete, and more are also both increasingly expensive and in short supply,” Wolf says. “Lot supply is a near-term hurdle that should become less of a headwind over the next six to 12 months as builders and developers scramble to get lots ready. Interest rates have offered a buffer to consumers against the seemingly unstoppable home price appreciation growth, [but] companies should evaluate how they will continue to be successful.”

Much like the previous year, it remains to be seen how the market will fare under these conditions—whether demand can remain strong or if any number of pressures will push it back.

Click here for the full Local Leaders PDF and here for the online list.